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But Why Should Housing Developers Pay For Schools?

There’s a certain logical fallacy on display here concerning the provision of schools and other public infrastructure. The problem coming from the actual definitions of why we bother to have government at all. Which is to provide, collectively, those things which don’t make sense to have provided individually, or even under the normal influences of market incentives.

That’s what government’s for, to produce those things that not-government won’t. At which point, why insist that the private sector must build schools?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Housing developers should pay to build new schools, new Department for Education guidance says[/perfectpullquote]

We want housing developers to build houses. Schools are public goods, thus they should be publicly provided.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Housing developers should pay to build new schools, new Department for Education guidance says. It comes amid pressure on school places with the secondary school population set to swell to 3.3 million within a decade, according to official projections. Developers already contribute to the cost of new infrastructure in the local area, but ministers are concerned that council requirements are sometimes vague and they vary around the country. The new guidance is designed to embolden councils to insist that new developers foot the bill for new school places their developments create, as a condition for granting planning permission. [/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Developers must also pay for the construction of new schools or new classrooms at existing schools, and finding the sites to build them on, it says.[/perfectpullquote]

Government currently takes 34% of everything. Shouldn’t that be enough to build schools?

There’s a rather more important point here though. Government can borrow much more cheaply than the private sector. Sure, it’s got to be us out here who pay for the schools one way or another. It’s only us 65 million who can be farmed to nourish that State after all. But if government can borrow at 0% – about right at present – and housing developers have to pay 3 or 7%, then to build a capital asset it should be government doing the borrowing, not the housing developers.

Think it through. If the argument is that government should build the railways because borrowing costs for a capital asset then it should be government building the schools because borrowing costs for a capital asset. And sure, it’s still the parents living in those houses who pay for the schools because their council tax will have to pay the capital plus interest. Instead of the higher bill for the price of their house including the market actor interest rates to build the schools.

That is, it shouldn’t be housing developers financing school buildings, it should be government directly. Hire the same people to build the actual schools, obviously, but the financing is better done through that lower cost method of taxation of the occupancy of the housing than the price of the housing itself.

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